From production to distribution: smart grids to transform energy system

Connected appliances, as well as the data they generate and the many smart optimization possibilities that they offer, are not directly compatible with the old-fashioned energy system where power distribution is centralized and indiscriminate. On the one hand, optimizing energy consumption could represent a massive energy-saving potential: it is estimated that installing active energy efficiency solutions everywhere in France could cut the national energy bill (66 billion euros in 2013) by 13 to 20 billion euros every year. On the other hand, that is only possible provided that buildings, cities and energy grids are transformed.

Energy production at building level

As energy-saving devices (batteries, light bulbs, household appliances) and connected objects go mainstream, the overall energy consumption goes down. But there is more to it than that: the development of renewable energy sources can equip each building with individual power production units: photovoltaic panels, mini-wind turbines, pumps, recycling of the heat from AC and hot water… There is a whole host of complementary possibilities. More and more buildings will be able to produce more than they consume and therefore to feed that excess energy to the smart grid, which ensures the balance between supply and demand at all times.

With every user becoming a potential producer, integrating these decentralized energy sources into a smart grid will require the installation of information systems that will organize and steer energy flows between buildings. Infrastructure (water, electricity, transport, public service, public buildings…) will be able to communicate and thus meet the economic, social and environmental needs of institutions, businesses and citizens. However, these new uses will impact players in the energy sector, which will have to adapt to the new situation.

Energy distribution at grid level

Indeed all these changes will affect the way we produce energy. Our current energy system is the result of previous industrial revolutions: energy is still being produced by large fossil fuel power plants connected to passive users, whereas today final users are becoming increasingly active as they can produce energy and make it available to others. The issue is not so much about generating enough energy as it is about distributing it better: microgrids and nanogrids are a miniaturized, decentralized and modern version of the electric system where consumers and producers are interconnected through an infrastructure that fits their size.

Combining intermittent energy sources with smoothing and storage techniques makes it possible to create virtual power plants (VPP) which can aggregate and better coordinate local production capacities. According to Navigant Research, the market should triple in volume between 2013 and 2020 (from 1 to 3.6 billion dollars), which should encourage players in the energy sector to jump on the bandwagon.

But the renewable energy boom, increased energy efficiency and decentralized production could disrupt the activities of utility companies and have a negative impact on their balance sheets. Decentralized, renewable power for individual uses will no longer be fed to the distribution grids managed by large operators. How can they adapt to a new situation where technical progress could decrease their income and hamper their investment activity? Automation and a more fine-tuned control of energy grids remain the best way of cutting costs while improving efficiency. But in order to take a full part in this transformation of the electric system, energy providers, which consumers see as most able to provide them with adequate solutions, must also offer their clients a range of new user-based services.

Find out more:

2015 report by Navigant Research (Smart Grid: 10 Trends to Watch in 2015 and Beyond)

Annual report by Smart Grid Consumer Collaborative (Connecting Consumers with the Promise of the Smart Grid)